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5 Common Credit Score Myths

Your credit score is an integral part of your financial
life. It is important that you understand what it’s all
about. Lenders, landlords, insurers, utility companies and
even employers look at your credit score. It is derived from
what’s in your credit reports, and it ranges between 300 and
850.

Yet, according to a survey that was recently conducted,
nearly half of all Americans don’t know how these scores are
derived or even what factors are used to come up with them.

For example, if your credit score is 580 you are probably
going to pay nearly three percentage points more in mortgage
interest than someone who had a score of 720.

Or another way of looking at it, if you had a $150,000 30-
year fixed-rate mortgage and your credit score was good
enough to qualify for the best rate, your monthly payments
would be about $890. This is according to Fair Isaac, the
company that created the FICO score and who the rate is
named after (Fair Isaac COrporation). If your credit is
poor, however, it is very likely that you would have to pay
more than $1,200 a month for that same loan.

With so much depending on the credit score, it’s important
to understand what it is all about and what are the things
that affect it.

Unfortunately, people commonly have a lot of misinformation
and misunderstandings about their credit score. Here are
five of the most common credit score myths and along with it
the true facts:

MYTH #1: The major bureaus use different formulas for
calculating your credit score.

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